War Business

As the military turned to private contractors post 9/11, a host of young Florida firms -- many in top-secret work and high-tech fields -- has been growing and hiring fast. But the privatization pendulum swings both ways.

67 Florida-based contractors doing business with the military do top-secret work. [Map: Jeff Papa]

The privatization pendulum can swing in both directions, however, and Celestar and the other firms now are facing their first headwind. Defense Secretary Robert Gates last year called for big changes in procurement and contracting to free up money in his budget. His plans for major weapons systems, such as halting production of the F-22 fighter, received widespread attention. But Gates also wants to cut the percentage of service support contractors in the defense workforce from 39% to the pre-2001 level of 26%.

He wants to cut some 33,000 contractor personnel by 2015, converting them, when necessary, to civilian government employees. "I think Secretary Gates has notionally got it right — that we've outsourced too much and the pendulum needs to swing back," says Todd Harrison, senior fellow, defense budget studies, at the Center for Strategic and Budgetary Assessments in Washington.

Florida contractors have employees all over the world, including in Iraq and Afghanistan. The military has turned to contractors for expertise that would be difficult or expensive for it to develop quickly. [Photo: AP]

For contract workers, converting to civilian government jobs can mean swapping higher pay for more long-term job security. For the contracting company, however, it means less revenue. Alexandria, Va.-based Cambridge International Systems, which supplies intelligence analysts, database managers and programmers to the military, some on top-secret work as far away as Afghanistan, had 13 workers on a contract at MacDill — until the government converted four, says Eric Garnier, vice president of Cambridge's systems and technology solutions unit. "They can be converted anytime the government wants," Garnier says.

In August, Gates ramped up the pressure, saying the military was "overreliant" on contractors and announced a 10% per year cut in funding for service contractors for three years. Gates also has called for a 10% cut in funding for intelligence advisory and assistance contracts.